Advancing SA Inc. through Social infrastructure Investment

As a follow up to the 5th Annual Student Housing Summit,?Thando Sishuba, head of SA Property at Sanlam Investments, shares his thoughts on the role that social infrastructure investment can play in rebuilding SA Inc..

Social infrastructure investment is a key component, and useful lever, in addressing the many social challenges that South Africa faces.?Social infrastructure investments aim to address longstanding social challenges – such as the lack of affordable housing, student accommodation, education and healthcare facilities. They also help address critical economic infrastructure challenges such as the creation of large dams and water-reservoirs, functional motorways, and sophisticated energy systems. These act as the engine of most modern, advanced economies.

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South Africa is an ideal case-study for the myriad possibilities that exist to address these ever-present challenges, given its mix of developed and developing social and economic structures. These social and economic contrasts have resulted in us having the highest Gini-coefficient score in the world, a measure representing the income inequality found within a country. This is fertile ground for both social scientists and economic strategists to unearth workable solutions that could herald a better future for all. The major goal of any thriving and forward-looking economic system is to have all-encompassing, unifying solutions that emphasise inclusivity.

?That South Africa sorely requires such a working and incrementally empowering system is beyond debate. In the context of our country, these can only be achieved by far-sighted social and economic policies, comingled with similar investment approaches. Socially focused investments, such as property impact funds, can make a real, lasting impact, while being a transformative force for good that sustainably empowers disadvantaged communities ensuring their inclusion in our overall growth trajectory.?

?Such investments are predicated on certain expected outcomes and pre-determined goals, such as the following:

1. Property impact funds focus on social infrastructure investments that aim to generate robust financial returns whilst making a direct, measurable, positive social and environmental impact. They typically focus on investments in affordable housing, student accommodation, education and healthcare facilities, while traditional property investments focus on retail, office and industrial properties. These funds often adopt a more value-added management approach. They mainly focus on areas that are relatively underserved and in need of rehabilitation, as opposed to traditional property funds that concentrate on more established locations and higher income populations. Research recently undertaken points to a combined R2.7 trillion investment universe and market opportunity in this emerging area.

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1. According to the National Housing Finance Corporation (NHFC), the demand for affordable housing in South Africa is estimated to be around 2.3 million units, with a significant backlog in urban areas. Investing in affordable housing would help to address these chronic shortages and provide more people with equitable access to quality, safe and secure housing units. It would also help ameliorate living conditions and lessen the need for people in the ‘missing-middle’ segment of the population to resort to the unsafe, squalid conditions often found in many informal settlements, with no basic services such as water, electricity, and sanitation. The need is particularly acute and pervasive at lower-income/missing-middle levels of our society – the segment of the population that can afford rent levels of R4000-R9000 per month – which presents what is estimated to be an investment opportunity of over R1 trillion.

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1. Investing in affordable housing and student accommodation can stimulate the local economy by creating direct and indirect jobs in the built environment, thus boosting economic activity through increased demand and consumption levels.?It is well-known that students from lower-income families often find it difficult to adjust and acclimatise to the higher standards and demanding requirements of higher-learning institutions, leading to a prevalence of dropouts and general failure. The provision of safe, quality, well-located and affordable student accommodation is critical in fostering confidence and ensuring the success of these students, thus greatly enhancing educational outcomes and assisting in reducing future unemployment, poverty and inequality.

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1. The inclusion of township/rural retail centres in social investment portfolios is also an important facet. Improving living conditions within township/rural communities, that often lack access to basic goods and services typically offered by retail outlets is a worthy goal, including the provision of essential services such as grant-payments, and creating permanent jobs in retail supermarkets, banks, pharmacies, restaurants, etc. Retail centres require cleaning and security services, a quick win for in-community job creation and poverty-alleviation strategies aimed at addressing disparities in our society.

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1. The provision of quality, affordable healthcare facilities in underserved areas could lead to better outcomes, as these facilities are often under-resourced and in short supply. The value-add would be immense in improving people’s lives and future economic prospects, whilst helping to avoid the higher incidence of illnesses and diseases. According to the World Health Organisation, South Africa has a high burden of disease, especially in underserved and rural areas.?A multi-pronged approach that combines investments across several sectors in a property impact vehicle will mobilise private sector capital towards social investments, directing it to the most-needy, deserving and underserviced areas of the country. The key is targeting individuals occupying the ‘missing-middle’ component of our society, to ‘lift as we rise’ as a nation. The government has demonstrated a strong commitment to improving access to and involvement in these social investments, albeit with limited success in implementing all of them. The private sector can make a massive difference by getting involved in large-scale projects that generate strong financial – and social – returns.?

Sanlam Investments Thando Sishuba

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